Top IT Outsourcing Hub: Latin America for U.S. Companies

2023 was a remarkable year from an economic standpoint in the United States. The inflation rate fell and unemployment remained below 5%, a threshold that the Congressional Budget Office considers full employment. Additionally, wage growth remained strong; reaching 5% in December of the past year.

Typically, as rates rise, unemployment also rises. However, in recent times, this has not been the case, leading to a phenomenon known as: a “Full employment recession”.

The labor market conundrum

In light of this situation, the question is: are there enough employees in the US market to meet the demands of employers?

According to the Bureau of Labor Statistics, in March 2024, there were approximately 0.8 unemployed persons per job opening. Thus, in the U.S., a people-based economy, there are more job openings than people to fill them.

The challenges of labor supply, upward pressure on wages, and the demand for different skill sets suggest that there will be increased pressure on businesses. These include upward pricing pressure, decreased profit margins, increased labor costs, or a combination of all three.

And, to further complicate matters, the numbers presented do not reflect the rapidly changing nature of the knowledge, skills, and abilities required by employees and employers, specifically in the IT industry.

Demand for highly skilled talent

U.S. companies are increasingly seeking highly skilled talent that aligns culturally and is available at a competitive price. This demand has grown significantly in recent years.

In this context, Latin America has become one of the most attractive destinations for American companies seeking IT outsourcing solutions. So much so that the market has experienced growth of over 6% annually in recent years, a trend expected to continue according to a study published by Deloitte.

The strategic value of outsourcing services

Outsourcing services are a high-value strategic business alternative in IT, particularly due to their high efficiency in talent selection.

For years, this alternative was mainly concentrated in Asia. However, Latin America has recently emerged as a focal point for highly skilled and competent technological human resources. This emergence has been driven by regional development and national investments in education, particularly in science, technology, engineering, and mathematics (STEM). It's worth noting that approximately 800,000 professionals from various technological fields are licensed annually in Latin America.

Countries like Uruguay, Colombia, and Argentina – where Build Online has its headquarters (Uruguay) and collaborators (Colombia and Argentina) – have emerged as important sources of technological resources.

The competitive advantages of Latin America

More and more global companies are choosing the region to meet their IT talent needs. In addition to regional development, there are other factors that lead companies, such as those from the United States, to outsource services to Latin America.

While the primary factor tends to be the price of the service, companies are beginning to assign value to other criteria that differentiate Latin American companies and human resources. In particular, their affinity with Western business values makes them particularly attractive.

Latin America has become an attractive destination for sharing time zones with North American countries, allowing real-time response to needs. This is something that teams located on the other side of the Atlantic Ocean cannot do with half a day or a full day of time difference with American companies.

Additionally, Latin American countries have the geographical advantage of being just a few hours away from companies that contract outsourcing services.

In conclusion, Latin America shares a cultural proximity that allows it to be a region compatible in various aspects of professional and business development with the United States. When you combine this demographic variable with educational advancements and competitive pricing, it is easy to understand how it has been able to compete in the production of qualified workers for the technological sector.